New Delhi: State-owned Oil and Natural Gas Corp's (ONGC) ₹4,022-crore share buyback programme will open on 29 January and close on 11 February, the company said in its offer letter to shareholders.
ONGC's board had, on 20 December, approved the buyback of 25.29 crore shares for ₹159 apiece as part of the government's plan to get cash-rich PSUs to part with their surplus. The government, which holds 65.64% stake in the company, stands to gain around ₹2,640 crore from tendering some of its shares in the buyback programme.
"The funds for the buyback will be met out of internally generated cash resources of the company," it said.
A buyback is an efficient form of returning surplus cash to members holding equity shares of the company.
After considering the mutual benefits to the company and equity shareholders, "the board decided to recommend buyback of not exceeding 25.29 crore equity shares representing 1.97% of the total number of equity shares in the paid-up share capital of the company at a price of ₹159 per share for an aggregate consideration of not exceeding ₹4,022 crore," it said.
The buyback is unlikely to cause any material impact on the profitability/earnings of the company and would not, in any manner, impair its ability to pursue growth opportunities or meet its cash requirement for business operations, according to the letter. "The buyback is expected to contribute to the overall enhancement of shareholder value and result in an increase in the return on equity of the company."
The government is pushing cash-rich PSUs to use their funds to buy back shares or pay a higher dividend. The Centre is looking to bridge the budgetary deficit through higher receipts of dividend as well as selling its shares in public sector units in the buyback programme.
ONGC will, however, not pay an interim dividend for now since it had almost no surplus left after accounting for its capital expenditure, sources with knowledge of the development said.
Last month, Indian Oil Corp (IOC) said it will buy back 29.76 crore shares for about ₹4,435 crore and spend another ₹6,556 crore on paying interim dividend to shareholders. The board of IOC, the country's largest oil firm, also approved buyback of up to 29.76 crore equity shares, or 3.06%, at ₹149 per share.
Beside ONGC and IOC, at least half a dozen other central PSUs have disclosed share buyback programmes. Prominent among these are NHPC, NMDC, Coal India, Oil India, BHEL, NALCO, NLC, Cochin Shipyard, and KIOCL.
The government is expected to participate in each of the share buyback programme.
IOC had also declared an interim dividend of 67.5%, or ₹6.75 per share, for 2018-19. The total dividend payout, excluding tax, will be around ₹6,556 crore, of which the government will get ₹3,544 crore plus the dividend distribution tax.
Oil India, too, had announced a buyback of 5.04 crore of its shares for a little over ₹1,085 crore.
The Department of Investment and Public Asset Management (DIPAM), mandated to raise ₹80,000 crore through PSU stake sale in the current fiscal year, had prodded all cash-rich PSUs to go for share buybacks. PSUs with a net worth of at least ₹2,000 crore and a cash balance of more than ₹1,000 crore have to mandatorily go in for share buyback.
Of the ₹80,000-crore disinvestment target, the government had so far raised just over ₹15,000 crore through minority stake sale in PSUs.
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